The Battle For Our Fiscal Survial

August 2, 2011 remains the projected day the nation's debt ceiling would be breached, attempting to set in stone a drop-dead deadline as the Obama administration and congressional Republicans continue to haggle over raising the limit.

"Secretary Geithner continues to urge Congress to avoid the catastrophic economic and market consequences of a default crisis by raising the statutory debt limit in a timely manner,” Miller said.

Her statement came as President Obama met at the White House on Wednesday morning with all the House Republicans. The debt ceiling was certain to be a major topic, particularly after the Republican-controlled House on Tuesday rejected a $2.4-trillion increase in the debt ceiling.

The measure did not include any spending cuts, which Republicans and some Democrats have insisted on. Instead, the vote was designed by House GOP leaders to send a strong message to the White House that it must compromise more on deficit reduction if it wants a debt-ceiling increase.

The date at which the U.S. would start defaulting on its obligations has been a bit of a moving target throughout this year. In January, Geithner warned congressional leaders that the debt ceiling technically could be reached as early as March 31, with the fiscal maneuvering delaying the "unthinkable" consequences for "several weeks."

Larger-than-anticipated tax revenues pushed that technical date to May 16, Geithner announced in April, when he first set a potential drop-date for the expiration of the "extraordinary measures" as July 8.

The federal government has to borrow an additional $125 billion a month to finance all of its commitments, from paying Medicare benefits to keeping American troops in Afghanistan.

 Without raising the $14.3 debt ceiling imposed by Congress the government’s borrowing binge must end with potentially devastating consequences—or easily manageable, and possibly even positive, consequences depending on who you believe.

There are some economists who are starting to argue that defaulting on loans to the U.S. government might not be that bad, after all Argentina did it back in 2002 and it helped to reduce their debt and remake their economy.

 Many Republicans in Congress are against raising the debt ceiling on the principle of deficit reduction, targeting the symbolic mechanism that allows the government to continue borrowing money and driving us deeper in debt.

 But there is an economic argument that bond markets are essentially holding the U.S. government hostage for their own gains.

A growing number of Democrats are threatening to defy the White House over the national debt, joining Republican calls for deficit cuts as a requirement for consenting to lift the country’s borrowing limit.

The tension is the latest illustration of how the tea-party-infused GOP is driving the debate in Washington over federal spending. And it shows how the debt issue is testing the Obama administration’s clout as Democrats, particularly those from politically competitive states, resist White House arguments against setting conditions on legislation to raise the debt ceiling.

Sens. Kent Conrad



The push-back has come in recent days from Sens. Kent Conrad (D-N.D.), chairman of the Senate Budget Committee, and Joe Manchin (D-W.Va.), a freshman who is running for reelection next year. Sen. Mark Pryor (D-Ark.) told constituents during the Easter recess that he would not vote to lift the debt limit without a “real and meaningful commitment to debt reduction.”

Even Sen. Amy Klobuchar (D-Minn.), generally a stalwart White House ally, is undecided on the issue and is “hopeful” that a debt-ceiling bill can be attached to a measure to cut the federal deficit, said her spokesman, Linden Zakula. Klobuchar is also up for reelection next year.

 “On the basis of careful analysis of actual and projected revenues and expenditures, the Treasury Department continues to project that the United States will exhaust its borrowing authority under the current debt limit on Aug. 2, 2011," said Mary Miller, Treasury's assistant secretary for financial markets.

The U.S. reached its $14.3-trillion debt ceiling on May 16, but Treasury officials have been doing some complex financial juggling to push off the date at which the nation would start defaulting on its obligations. Treasury Secretary Timothy F. Geithner has said those "extraordinary measures" could only postpone the fiscal reckoning for several weeks.